This video was recorded on Tuesday 9 October 2018.

An unhealthy concoction of factors are creating a classically late-cycle feel in the markets. In a challenging time for bond managers, John Pattullo, Co-Head of Strategic Fixed Income, simplifies the conundrums and shares his views.

Key points:

  • While secular trends have remained entrenched, the last two years have been characterised by a reflation trade, primarily driven by China reflating the world in 2015-16
  • There is a divergence in equity markets — US growth equities versus European value
  • There is a clear contradiction in the narratives from the bond and equity markets
  • John believes the technical breakout in yields is more of a false dawn
  • John also believes the unhealthy concoction of factors will prove to be a buying opportunity for bonds in a few months’ time



A method of estimating a bond's price volatility, expressed as a number of years, measured in terms of the weighted average of all the bond’s remaining cash flows (both coupons and principal). The larger the figure, the more sensitive it is to a movement in interest rates.

An informal name for the US central bank — the Federal Reserve Bank; also for the Federal Reserve Board or the Federal Reserve System.

High yield bond
Corporate bonds rated below investment grade (BBB-/Baa3) by major credit rating agencies such as Moody’s or Standard & Poor’s (S&P). The typical high yield issuer has a long-term credit rating of BB/Ba2 or lower.

Santa Claus rally
A rise in stock prices in December, usually in the final week